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Richmond – Governor Terry McAuliffe today announced that the federal government approved a modification to the regional foreign trade zone (FTZ 20) that streamlines process for companies applying for FTZ status and provides The Port of Virginia (POV) another tool to attract new businesses to the Commonwealth.
Last spring, POV, which is the grantee of FTZ 20, applied to the U.S. Department of Commerce’s Foreign-Trade Zones Board to reorganize the zone under the Alternative Site Framework (ASF) option. The ASF designation streamlines the process for companies applying for FTZ status.
A primary benefit of reorganizing under ASF is that it allows existing and new companies within the FTZ 20 service area to obtain FTZ site designation within 30 days of receipt of the application by the Foreign-Trade Zones Board. Without the ASF option, FTZ site designation can take up to a year. The ASF designation was approved earlier this month.
“This new development at the Port of Virginia will encourage companies – current and potential port users – to choose to do business and create jobs within the Foreign Trade Zone that is primarily served by our port,” Gov. McAuliffe said. “The Port of Virginia is one of the Commonwealth’s strongest economic assets, and this new approval to expedite Free Trade Zone designation will greatly improve our ability to bring more business to the port and create more jobs along the way.”
The FTZ 20 service area consists of the Counties of Accomack (partial), Gloucester, Isle of Wight, James City, Mathews, Northampton, Southampton, Sussex, Surry and York, and the Cities of Chesapeake, Franklin, Hampton, Newport News, Norfolk, Poquoson, Portsmouth, Suffolk, Virginia Beach and Williamsburg.
Foreign-Trade Zones are secure areas under US Customs and Border Protection (CBP) supervision that are generally considered outside CBP territory. Companies that operate in foreign-trade zones can defer, reduce, or eliminate Customs duties on imported products.
Once in a zone, imported components can be stored, distributed, assembled, manufactured, repackaged, tested, etc. Customs duties are not paid on products exported outside of the US, rather duty is only paid on products entering US Customs territory. Manufacturing operations receive the most benefit from the FTZ when the duty rate on the raw materials is higher than the duty rate on the finished product and when the volume of imported shipments is high.
Below is a Port of Virginia Fact Sheet on today’s announcement and Virginia’s Foreign Trade Zone designation:
Free-Trade Zone 20
Q: What is a Foreign-Trade Zone?
A: A foreign-trade zone is a designated location in the United States where companies can use special procedures that help encourage US activity and value added - in competition with foreign alternatives - by allowing delayed or reduced duty payments on foreign merchandise, as well as other savings.
A site which has been granted zone status may not be used for zone activity until the site has been separately approved for FTZ activation by local US Customs and Border Protection (CBP) officials, and the zone activity remains under the supervision of CBP.
Q: What is Alternative Site Framework (ASF)?
A: The “alternative site framework” (ASF) is an optional framework for organizing and designating sites that allows zones to use quicker and less complex procedures to obtain FTZ designation for eligible facilities.
A subzone or usage-driven site can be designated anywhere in the service area within 30-days using a simple application form. The ASF allows zone designation to be brought to any company that needs it, eliminating the need for zone grantees to predict where the zone will be needed and pre-designate sites.
Q: What type of zone sites are in ASF?
A: Magnet sites, usage-driven, and subzones.
Magnet Sites are usually located at ports or industrial parks. They are open to multiple zone users.
FTZ 20 Magnet Sites
Site 9 – Cavalier (Usui)
Site 21 – Virginia Regional Commerce Park (Sumitomo)
Subzones/Usage-driven sites are approved for a specific company/use.
FTZ 20 Subzones
Site 20E – Stihl, Inc.
Site 20D – Canon Virginia, Inc.
FTZ 20 Usage-Driven Sites
Site 2 – Progressive Distribution/Evans Distribution
Site 3 – Givens
Site 25 – Cargoways Logistics/ Norfolk Marine Terminal
Site 32 and 33 – Patco Industries
Site 35 – Katoen Natie (undergoing activation)
Site 36 – Grandwatt Electric Corp. (undergoing activation)
Q: Are there other existing pre-designated sites in FTZ 20?
A: Yes, Port of Virginia was able to keep a few sites in our ASF application that will allow companies to skip the designation process and move straight into the activation process; if they locate at these sites. If the sites are never activated they will sunset.
Usage-Driven Sites (3 year sunset provision)
Site 22 – Port Norfolk Holdings
Magnet Sites (5 year sunset provision)
Site 19 – Shirley T. Holland Commerce Park
Site 23 – Virginia Commerce Center
Site 24 – Westport Commerce Center
Site 34 – Suffolk Intermodal Center
Q: Why is Accomack County only partially served?
A: CBP will only service areas that are within 60 miles/90 minutes from the servicing port of entry. Therefore, the Port of Virginia had to amend our service area to only partially include Accomack County. The town limits of Onancock and Onley are still included.
Q: What if a company wants to utilize the FTZ outside of FTZ 20s service area of 60 miles/ 90 minutes?
A: Companies can still utilize FTZ 20 with CBP approval. This would be done by establishing the site as a subzone. A subzone is a site (or group of sites) established for a specific use.Subzones require additional fees to be paid to the Department of Commerce. The application fee for subzone not involving production activity or involving production activity with less than 3 products is $4,000. The fee for subzones involving production activity with 3 or more products is $6,500.
Example: If Wallops Island wants to activate again, we would service them with CBP approval. They would become a subzone of FTZ 20.
Q: Is the Port Authority going to expand FTZ 20 into Northeast North Carolina?
A: The Port is looking at our original charter, as opposed to just the FTZ charter, to see if it states that we are only to serve the state of Virginia. This will likely have to be reviewed by the AG’s office in Richmond. However, if CBP agrees, we can service any company with a subzone.
Q: What fees are involved with FTZ?
A: There is an application, activation, and annual fee paid to The Port Authority (see FTZ 20 Zone Schedule). Additionally, there are consultant (if needed) fees, inventory control fees, and a FTZ operator’s bond paid to CBP.
Q: Where are other VA FTZs located?
A: In Virginia there is a total of 6 FTZs.
FTZ 20: Hampton Roads (Alternative Site Framework)
FTZ 137: Dulles (Alternative Site Framework)
Washington Airports Task Force
FTZ 185: Culpeper (Alternative Site Framework)
FTZ 204: Tri-City Regional Airport (Washington, VA and the Cities of Norton and Bristol, VA) (Alternative Site Framework)
FTZ 207: Richmond (Applying for Alternative Site Framework)
FTZ 238: New River Valley Airport (Alternative Site Framework under Review)
Q: What are the benefits of FTZs?
Duty Deferral : Users can avoid paying duties on imported merchandise until the goods are removed from the FTZ and enter in the U.S. commerce. Duty on machinery is deferred until it is put into production; there is no duty paid on re-exports or scrap.
Inverted Tariffs/Duty Reduction: FTZ zone users can pay lower duty rates on goods produced in the zone when the finished product has a lower duty rate than the imported components and parts.
Weekly Entries: Zone users will benefit if they file multiple Customs and Border Protection entries each week. FTZs allow the user to file this paper work once a week at a rate no higher than $485.
No Time Constraints: Merchandise may remain in the zone indefinitely, whether or not it is subject to duty.
Customs Compliance: U.S. Customs & Border Protection requirements and federal criminal sanctions are deterrents against theft. Cargo that is imported into FTZs have fewer incidents of loss and may result in lower insurance costs.
-Help facilitate and expedite international trade.
-Provide special customs procedures as a public service to help firms conduct international trade related operations in competition with foreign plants.
-Encourage and facilitate exports.
-Help attract offshore activity and encourage retention of domestic activity.
-Assist state/local economic development efforts
-Help create employment opportunities.
The Virginia Port Authority (VPA) is an agency of the Commonwealth of Virginia, reporting to the state Secretary of Transportation. The VPA owns and operates four general cargo facilities on behalf of the state: Norfolk International Terminals, Portsmouth Marine Terminal, Newport News Marine Terminal and the Virginia Inland Port in Warren County. In addition, the VPA leases and operates APM Terminals in Portsmouth and the Port of Richmond. If you have questions about this news release or other inquiries as they relate to The Port of Virginia, please contact Joe Harris, spokesman and director of media relations. He can be reached at 757-683-2137 in his office or 757-675-8087 on his cellphone.